Real estate investors have been urged to order an immediate independent valuation of their properties after the federal budget upended the way capital gains will be calculated on homes bought before budget night. The warning matters now because the changes will eventually force a split calculation on existing investment properties, with part of the gain taxed under the old rules and part under a new indexation system linked to inflation.
The federal budget released last week said the capital gains tax discounts introduced by the Howard government would be scrapped in favour of indexation. Under the plan, investors who owned property before budget night will be allowed to split their capital gains calculations under two systems, with the gain before July 2027 separated from any increase after that deadline. The post-July 2027 portion will be taxed under the new indexation system, making the value of the property at 30 June 2027 critical to the final bill.
Rasti Vaibhava said the Australian Taxation Office will need a value for the property as at 30 June 2027 to make the split, and warned that without a proper registered valuation, the default could be a broadbrush apportionment based on time held. “To make that split, the ATO needs a value for the property as at 30 June 2027. If you don’t have a proper registered valuation, the default approach may simply apportion the gain based on time held,” Vaibhava said.
That is why investors are being told to act early. Vaibhava said the government would effectively need to estimate what a property was worth at different points after budget night to work out how much of any gain fell under the new system, and that a simple averaging approach could miss the real pattern of price growth. “The problem is that this can understate how much of the growth actually happened before 2027, especially in markets that have already grown strongly,” he said.
The risk is greatest for owners who rode the Covid housing boom and may now face a tax calculation that does not cleanly match the rise in value they actually saw. Vaibhava said investors could end up paying tax on gains they never truly made after the new system begins if the property history is not properly documented. The government has defended the overhaul as necessary to fix housing-market distortions and address what Jim Chalmers described as intergenerational inequality.
For owners of existing investment properties, the practical step is straightforward: secure an independent valuation before the new regime locks in. The policy shift does not change the fact that the gain before July 2027 and the gain after it will be treated differently, but it does mean the paper trail now could shape the tax bill later. By 30 June 2027, the ATO will need a property value that can support that split, and without it, investors may be left with a rougher estimate than they expected.
